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The Battle for the Consumer: Trends Shaping the Travel, Hospitality and Leisure Industry in 2018

New and nontraditional competitors continue to have an impact among travel, hospitality and leisure (TH&L) companies, while strength in the global economy is expected to fuel growth in the year ahead, according to Guy Langford, vice chairman and U.S. Travel, Hospitality and Leisure leader, Deloitte & Touche LLP. He discusses how technology investments and innovations are redefining service, as well as creating new levels of risk for traditional competitors, and the important—but sometimes overlooked— benefits of employee engagement.

Guy Langford

Q: What trends are behind the growth outlook for the TH&L industry in 2018?

Guy Langford: A significant trend is the convergence of different forces, from technology advances to new entrants into the marketplace, that together have the potential to drive travel bookings to new highs in 2018. Perhaps the most powerful drivers are a surge in global travel from an emerging middle class, strong indicators for consumer spending in the U.S., healthy corporate travel demand and a shift in consumer spending from goods to experiences. At the core of the industry’s growth is a stronger global economy. Each year, the global traveler pool is flooded with millions of new consumers from both emerging and developed markets, many with rising disposable incomes and a newfound ability to experience the world. Another reason for optimism is the large amount of capital investment in innovation across the global travel ecosystem over the past two years, including in new travel startups.

That’s not to say the industry is without risks that can be damaging to the outlook, as we saw in 2017, including a volatile and damaging hurricane season, as well as wildfires and earthquakes in the U.S., Mexico and the Caribbean.

Q: What are some of the implications of those external threats for the industry?

Guy Langford: We saw in 2017 that travelers were in general extremely resilient through trying times, including in the aftermath of severe weather disruptions. In fact, many of the large online travel agencies were able to see travel demand return to normal levels roughly three to four weeks after major catastrophic events in 2017. But the bigger message has to be that given the rising unpredictability of conditions facing the industry, brands should make enterprise risk management a priority, and help ensure it is closely aligned with long-term growth strategies. Extra vigilance is critical to monitor evolving, high-profile forms of risk such as cybersecurity and food safety, which have the potential to do fast and severe damage to brands and reputations.

In addition, the waves of innovation that we expect to see in the market in the years ahead may bring a new set of competitive threats that should be considered carefully. For example, while the outlook for the hotel industry is generally positive, we are seeing game-changing advances such as travel apps that allow consumers to compare more hotel and private accommodation options than ever before. Along with unprecedented choice, however, comes unprecedented traveler expectations for the hotel experience. With instant access to hotel reviews and virtual tours, travelers can easily sniff out “big-box” properties that fail to offer something truly unique and memorable, opening the door to negative comments on social media, as well as loss of customers.

The drive to innovate is helping reshape the restaurant segment as well. Demand for unique food experiences, authentic local menus and convenience are drawing customers away from traditional brick-and-mortar locations as they explore alternatives such as pop-up food kitchens, food trucks, restaurants in premium grocery stores, subscription-based meal kits, and even privately hosted meals enabled by the sharing economy. Traditional players should consider the risks of sticking with long-held strategies. Brands that fail to innovate may risk losing market share.

Q: How are technology-based advances reshaping the TH&L industry?

Guy Langford: Technologies such as artificial intelligence, machine learning, IoT and near-field communication mobile payment have the potential to create new personalized moments that matter to travel consumers in areas that are often riddled with pain points, interruptions and a difficult one-size-fits-all mentality. While travel brands have been tiptoeing around personalization for quite some time, 2018 could be a year for meaningful progress. The personalization we see coming to market involves brand interactions in the digital or physical realm that provide customers with levels of service that can be tailored to individual needs and preferences. Pushing relevant customer data to front-line employees in real time can help employees create more meaningful connections, and that is one way travel brands can make this new travel experience a reality in 2018. For example, some airlines are piloting check-in recognition programs that identify corporate flyers, enabling flight attendants to thank them by name when they check in. In addition, flight attendants are provided recognition seat maps on their mobile devices that can identify corporate travelers.

In the coming years, technology can enable large brands that serve millions of travelers each year to interact with their customers more like small businesses. That can allow push notifications about a jazz show to be sent to a hotel guest who has a passion for live music, along with a link for discounted tickets. When combined with experiential upgrades, personalized interactions can unlock new revenue streams and facilitate a more surgical approach to marketing and merchandizing.

Q: What are other ways in which TH&L brands can distinguish themselves in the year ahead?

Guy Langford: Investing in employee engagement has never been more important, but employee-focused investments are often overshadowed by a focus on customer experience and technology. In fact, a brand’s commitment to the employee experience can have considerable reach and strategic value, both as a driver of workplace satisfaction and as a profit-enabling initiative. Many winning brands are discovering that strategic employee engagement programs are the foundation for redefining and transforming the customer experience, by driving brand loyalty and growing market share.

For example, engaged and motivated employees are at the heart of positive restaurant experiences—from how customers are greeted when they walk through the door, pick up a take-out order or get home delivery, to how quickly and well their food is prepared and served. According to a recent Deloitte customer experience survey, a staff of friendly, hospitable employees was cited as the most important element needed for a positive experience at a restaurant. The future of customer-centric value creation in this industry is often made possible through data and technology, but a lot of the value comes from powering more meaningful human-to-human interactions between employees and customers.

Q: What other trends will be shaping the TH&L industry in the year ahead?

Guy Langford: Healthy hospitality, in which companies are finding new ways of embracing health-consciousness travelers, is increasingly seen as a majoropportunity for brand growth. Many large hotel chains are implementing a variety of strategies to expose their brands in the health and wellness space, including high-end spa experiences, alternative medicine services and others that certain travelers are willing to pay a premium to access. That can help them compete against wellness resorts, some of which offer cutting-edge wellness experiences, as well as experts from across the medical field, for a premium fee.

The rapid growth of online travel agencies (OTAs) and private accommodations also will likely continue to shape segments of the industry. OTAs continue to invest aggressively in their technology stacks, creating digital trip-planning experiences that are difficult to match. Among private accommodations, new, small players are setting up in niche markets like luxury rentals. As a result, many traditional hotels are having to rethink product and brand strategies to remain attractive to those consumers who love the rental experience. It’s just one of several battlefronts for the consumer that continues to shape the industry.

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